India to hold less dollars in reserves, PM’s adviser says

Bloomberg

"The major part of Indian reserves is in dollars / that is something that’s a problem for us," Tendulkar, chairman of the Prime Minister’s Economic Advisory Council, said Friday in Aix-en-Provence, France, where he was attending an economic conference.

Singh is preparing to join leaders from the Group of Eight industrialized nations - the U.S., Japan, Germany, Britain, France, Italy, Canada and Russia - at a summit in Italy which is due to tackle the global economy. China and Brazil will also send representatives to the summit.

As the talks have neared, China and Russia have stepped up calls for a rethink of how global currency reserves are composed and managed, underlining a power shift to emerging markets from the developed nations that spawned the financial crisis.

"There should be a system to maintain the stability of the major reserve currencies," Former Chinese Vice Premier Zeng Peiyan said in a speech in Beijing Thursday, highlighting China’s concerns about a global financial system dominated by the dollar.

Fiscal and current-account deficits must be supervised as "your currency is likely to become my problem," said Zeng, who is now the head of a research center under the government’s top economic planning agency. The People’s Bank of China said June 26 that the International Monetary Fund should manage more of members’ reserves.

Russian President Dmitry Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, while questioning the dollar’s future as a global reserve currency. Russia’s proposals for the Group of 20 major developed and developing nations summit in London in April included the creation of a supranational currency.

Emerging markets remain dependent on the currency of the U.S., the world’s largest economy and a $2.5 trillion export market.